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Zero Taxes?
Old 04-06-2007, 06:38 AM   #1
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Zero Taxes?

Hypothetical: Self-employed, No employees. Annual earned business income 22k. Business expenses = 10k ; Simple IRA max contribution =11k. After accounting for self employment tax , one personal exemption and real estate tax deduction on personal residence, taxes on the 22k should be close to zero.......is this thought process correct or am I missing something?
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Re: Zero Taxes?
Old 04-06-2007, 06:52 AM   #2
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Re: Zero Taxes?

I am not a tax expert ( there are some on this board and maybe they will chime in) but I used a solo401k for 2006 and didn't pay taxes - similar to your situation but with more income. You might want to look into a solo for yourself if you want to move addtional non-qualified assests into non-taxable. At 22k you could put in about 20k.
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Re: Zero Taxes?
Old 04-10-2007, 05:51 AM   #3
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Re: Zero Taxes?

Taking into account the 10k business exp, I assume one could easily do the remaining 11k into the solo 401k and still get the zero tax status.
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Re: Zero Taxes?
Old 04-10-2007, 06:18 AM   #4
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Re: Zero Taxes?

Your thinking is correct, your liability would be $0

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Re: Zero Taxes?
Old 04-10-2007, 07:56 AM   #5
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Re: Zero Taxes?

yup, zip, nadda .... AND if you had a kid you'ld GET ($1000) A REFUND!
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Re: Zero Taxes?
Old 04-10-2007, 09:57 AM   #6
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Re: Zero Taxes?

Quote:
Originally Posted by tryan
yup, zip, nadda .... AND if you had a kid you'ld GET ($1000) A REFUND!
How do you get a $1000 refund?
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Re: Zero Taxes?
Old 04-10-2007, 11:36 AM   #7
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Re: Zero Taxes?

Probably referring to the dependent tax credit, $1,000 per kid, which is refundable at a low enough income level. This means a person can actually receive income taxes from the feds (not just a refund of money paid in). See line 68 of this year's 1040.

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Re: Zero Taxes?
Old 04-10-2007, 12:00 PM   #8
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Re: Zero Taxes?

You may not owe federal income tax, but you will still owe Social Security and Medicare taxes.
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Re: Zero Taxes?
Old 04-10-2007, 12:52 PM   #9
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Re: Zero Taxes?

Quote:
Originally Posted by SecondCor521
Probably referring to the dependent tax credit, $1,000 per kid, which is refundable at a low enough income level. This means a person can actually receive income taxes from the feds (not just a refund of money paid in). See line 68 of this year's 1040.

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So, if you have, say, 400 kids, we're talkin' some serious money here!

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Re: Zero Taxes?
Old 04-10-2007, 01:02 PM   #10
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Re: Zero Taxes?

Quote:
Originally Posted by JustCurious
You may not owe federal income tax, but you will still owe Social Security and Medicare taxes.
But if the expenses were $22,000 then there'd be no tax whatsoever.
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Re: Zero Taxes?
Old 04-10-2007, 01:29 PM   #11
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Re: Zero Taxes?

Would one's personal exemption and/or personal property tax deduction mitigate the fed tax/soc/medicare (ie., self employment) taxes. I would also think that in most staes, if there's no fed tax due, then no state tax would be due either.
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Re: Zero Taxes?
Old 04-10-2007, 03:43 PM   #12
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Re: Zero Taxes?

Quote:
Originally Posted by ferco
Would one's personal exemption and/or personal property tax deduction mitigate the fed tax/soc/medicare (ie., self employment) taxes.
No, it would not mitigate the social security and medicare taxes.
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Re: Zero Taxes?
Old 04-10-2007, 04:18 PM   #13
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Re: Zero Taxes?

But don't forget the $1,540 that you would owe for FICA!
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